Understanding the Crypto Market: From Basics to Trading

[SHOW SLIDE 1] In the previous lessons, we became familiar with the concept of financial markets, and then we examined the structure of the Forex market. Now, we want to explore the crypto market from the ground up and develop a clear, practical understanding of cryptoassets, blockchain, wallets, exchanges, trading pairs, market instruments, and the risks associated with this field. [PAUSE] In this lesson, I’ll explain blockchain to the extent necessary for you to understand the overall mechanism of the crypto market. We’ll explore the technical architecture of blockchain, different consensus mechanisms, scalability, transaction structures, network security, different layers, and more specialized topics in a separate supplementary lesson. In this video, we’ll also discuss crypto trading and investing. However, comprehensive instruction on investment methods, as well as other ways of earning income from crypto—such as staking, mining, liquidity provision, lending, yield farming, and arbitrage—will be provided in separate courses, because each of these methods has its own specialized mechanisms and risks. [PAUSE] [SHOW SLIDE 2] Now, let’s begin with the main question: What is crypto? In this context, the word Crypto is the shortened form of Cryptocurrency or Cryptoasset. In everyday language, terms such as crypto, digital currency, cryptocurrency, coin, and token are sometimes used interchangeably. However, these terms don’t have exactly the same meaning. A cryptoasset is a type of digital asset whose creation, storage, transfer, or ownership record generally relies on cryptography, distributed ledger technology, or similar technology. The Financial Stability Board also defines cryptoassets as a type of privately issued digital asset that primarily relies on cryptography, distributed ledger technology, or similar technology. [PAUSE] Crypto can have many different uses. For example: Transferring value; Making payments; Storing or representing digital ownership; Paying for the use of a network; Executing smart contracts; Participating in the governance of a protocol; Accessing a product or service; Creating economic incentives to secure a network; Representing an asset or a right; Being used as collateral; And, of course, trading and investing. Therefore, [EMPHASIS] not all cryptoassets can simply be considered internet money. Some of these assets are designed for payments. Some serve as the economic fuel of a network. Some have a governance role, while others represent a particular asset, right, or form of access. On the other hand, not every digital asset is necessarily crypto. The balance in a bank account, credit inside a game, or points from a store can all be considered digital assets, but they aren’t necessarily cryptoassets. For example, PayPal is considered a digital asset, but it isn’t crypto. [PAUSE] [SHOW SLIDE 3] Now, let’s see exactly what Cryptocurrency means. Cryptocurrency refers to a category of digital or virtual currencies that use cryptography to conduct financial transactions in a way that makes them impossible to decrypt. These currencies aren’t controlled by a specific central authority. They’re fast and cost-effective, they remove geographical limitations, and most importantly, they were created with privacy in mind. The best-known cryptocurrency is Bitcoin, a currency that even people who aren’t familiar with this market have probably heard of. The cryptocurrency market is still a very young market, and because it’s open 24 hours a day, 7 days a week, it offers an exceptional amount of opportunity for activity. Many people use cryptocurrency for investment, preserving the value of their money, or simply transferring funds. However, throughout this course, you’ll learn that there are many other varied and highly attractive ways to use the cryptocurrency market and earn income from it. Before we explore this market in greater detail, it’s better to become somewhat familiar with blockchain technology. [PAUSE] [SHOW SLIDE 4] What is blockchain? Before we start explaining blockchain, let me talk briefly about the systems that existed before blockchain so that we can understand it more clearly. Before blockchain, almost everything we had in the online world—from public websites to financial platforms—operated through a centralized system or server. For example, consider the system used by a bank. How are bank transactions processed? A bank has a central server. When I send an amount of money to you, the transaction first goes to the bank’s central server in a fraction of a second, and then it’s sent from that server to you. Everything related to the transaction—including deducting money from my account, depositing money into your account, calculating fees, and other processes—is performed and controlled within that central server. Now, if someone wants to hack this system, they only need to gain access to that central server. They may then be able to access the information or any other part of the system available to them. The owners of the bank can also restrict or block users according to their own policies. They can decide which account is allowed to conduct transactions, how much it can transact, and which account must be frozen or restricted. This is a simple example of what happens in traditional systems. [PAUSE] Now, imagine that the same bank transaction is processed on a blockchain network. A blockchain network doesn’t have a central server. Instead, it has a ledger where every event on the network is recorded, and everyone on the network has access to that ledger. In addition, every event that occurs on the network must be verified by the system. For example, I can’t avoid sending money to you and then claim that I sent it, because the actual transaction data is recorded on the network’s ledger. The major difference between blockchain and a traditional system is that there is no central server here. To explain it very simply, everyone who is part of this financial system is considered part of the overall server, and all these parts work together in an integrated way through network confirmations. Therefore, if someone wanted to hack this system, they would supposedly have to hack more than 50 plus 1 percent of everyone participating in the system at the same time, which is impossible. This is why blockchain networks are highly secure. In addition, no one on this network has the power to make decisions for someone else. There are no restrictions or account blocks, and the blockchain network itself acts like a completely impartial supervisor, recording and controlling all transactions so that forgery or fraud is absolutely impossible. [PAUSE] This was a simple example to give you a general understanding of this extremely powerful system. In the future, blockchain will completely transform many systems around the world, including the global financial system. In fact, it has already created major changes, and many companies and individuals currently use cryptocurrencies to transfer money, save funds, and for other purposes. If you’d like to learn more about blockchain, you can refer to the supplementary cryptocurrency lessons. [PAUSE] [SHOW SLIDE 5] Now, we come to this question: What currencies are traded in the cryptocurrency market? Cryptocurrencies, or digital currencies, are traded in this market—currencies such as Bitcoin with the symbol BTC, Ethereum with the symbol ETH, Tether with the symbol USDT, and thousands of other currencies. By visiting CoinMarketCap.com, which is one of the largest cryptocurrency reference websites, you can view a complete list of digital currencies along with their details. As you can see on this website, the first currency is Bitcoin, which is currently priced at 85,000 dollars and, with a market capitalization of 1.72 trillion dollars, is the largest currency in the crypto market. The second currency is Ethereum, which is also one of the strongest and largest currencies in the market. In the same way, you can view all the other currencies and their details on this website. I won’t go into further detail about CoinMarketCap in this section, but I’ll explain the entire website to you in a separate video, because it’s a very large website with a great deal of data and many features. [PAUSE] [SHOW SLIDE 6] Now that we’ve become somewhat familiar with crypto currencies, we want to learn about the different categories of digital currencies. Generally speaking, we can divide digital currencies into two categories. On one side, we have Bitcoin, which is the leader of the cryptocurrency market. Around 60 percent of the crypto market’s volume belongs to Bitcoin. This is called Bitcoin Dominance. Any change in Bitcoin’s price can have a significant effect on other parts of the market. For this reason, Bitcoin can be analyzed as an indicator of the crypto market. The second category includes all cryptocurrencies other than Bitcoin, which are called Altcoins. So, [EMPHASIS] the entire crypto market, excluding Bitcoin, falls into the altcoin category. Altcoins themselves are divided into different categories. For example, Ethereum is a major altcoin associated with smart contracts. Ethereum is the second-largest currency in the market and accounts for around 11 percent of the market’s volume. [PAUSE] [SHOW SLIDE 7] Another important category is Stablecoins. Stablecoins are currencies that always have a stable price, and their value is usually equal to one dollar. These currencies are mainly used for transactions. However, stablecoins have no connection to the actual dollar or the U.S. government. They’re simply equal in value to one dollar. To explain it very simply, it’s as if you had a virtual dollar that you could use to carry out your transactions. One of the best-known stablecoins is USDT, or Tether, which ranks third in the market and is the most widely used stablecoin in the market. The next one is USDC, which is also a stablecoin but is issued by a different company. This currency is also widely used and ranks sixth in the market. [PAUSE] Another category is meme coins. A Meme Coin is an asset whose identity, community, or demand is largely based on an internet joke, a character, popular culture, or a social trend. Dogecoin is one of the best-known examples in this category. Meme coins may develop large user communities or achieve significant liquidity. However, they’re generally associated with risks such as extreme volatility, concentrated ownership, dependence on social media, and a rapid decline in demand. For this reason, they aren’t suitable for long-term investments and carry a high level of risk. [PAUSE] In the video about the different ways of earning income from the crypto market, you’ll learn much more about the different types of currencies and their various uses. In this video, you only need to know that there are different types of crypto currencies, such as: Smart contract currencies; Stablecoins; DeFi tokens; Exchange tokens; Governance tokens; Utility Tokens; Privacy Coins; Meme coins; And other categories. Each of these assets has its own specific use, and the way it’s viewed or used may be completely different from another currency. In the supplementary crypto video, you can become more fully familiar with these categories. [PAUSE] [SHOW SLIDE 8] Now, we come to the difference between a Coin and a Token. You may have heard some digital currencies described as coins and others as tokens. But what is the difference between a coin and a token? A Coin is the native asset of an independent blockchain. What does that mean? It means that a coin is a currency that has its own dedicated blockchain network. For example: BTC is the native asset of the Bitcoin network. ETH is the native asset of the Ethereum network. And SOL is the native asset of the Solana network. A Token, however, is usually an asset created through a smart contract on another blockchain, and it doesn’t have an independent blockchain of its own. For example, many tokens are built on Ethereum, Solana, or other networks, and they use the mechanisms and security of the host blockchain for transfers. Therefore, Ethereum, or ETH, is considered a Coin because it’s the native asset of the Ethereum network. But Tether, or USDT, for example, is a token that uses different networks, such as the Ethereum network. Tether doesn’t have its own dedicated blockchain network and is created on networks such as Ethereum. [PAUSE] [SHOW SLIDE 9] To understand this difference more clearly, keep this example in mind. Imagine that there are several different private roads for traveling from City A to City B. I can use the Ethereum car, which has its own dedicated road called the Ethereum Highway, and travel to City B using that dedicated road. In another situation, I can use the Tether car, but the Tether car doesn’t have a dedicated road of its own. Therefore, I have to use one of the existing roads, such as the Ethereum road, to reach City B. In the crypto market, we call these roads networks. The Ethereum network, the Bitcoin network, the Solana network, and other networks. These networks differ from one another in terms of speed, transaction fees, security, and similar factors. Each person must choose the appropriate network according to how they intend to use it. For example, some meme coins are only offered on the Solana network. Therefore, you can’t use another network to buy, sell, or transfer them. In a separate video, we’ll discuss networks, correct transfer procedures, swapping, and bridging in full detail. [PAUSE] [SHOW SLIDE 10] Now, we want to examine the difference between trading in the Forex market and trading in the crypto market. Everything we discussed in the Forex video about currency pairs, the primary currency, and the supporting currency also applies to the crypto market. However, there is one very important difference, which we’ll get to shortly. Before examining that difference, if you haven’t watched the Forex lesson, I’ll briefly explain currency pairs, the primary currency, and the supporting currency again over the next two slides. If you’ve already watched the Forex lesson, you can skip these slides and go directly to the slide explaining the important difference between Forex trading and crypto trading. [PAUSE] Just like in the Forex market, currencies in the crypto market are displayed as pairs. In this market, we don’t have a currency on its own. We always see currencies in the form of pairs, meaning the value of each currency is expressed in comparison with another currency. For example, we don’t have BTC or USDT on its own in the market. Instead, we have the BTC/USDT pair, which shows the relationship between Bitcoin and Tether. When we say that the price of BTC/USDT is 85,000, it means that one Bitcoin is worth 85,000 Tether. Tether itself is always equal to one U.S. dollar. Therefore, at this moment, each Bitcoin is worth 85,000 dollars. So, the point you need to understand is that [EMPHASIS] the value of one currency is always expressed in comparison with another currency. [PAUSE] [SHOW SLIDE 11] Every currency pair has two components. The first component is the base currency. The first currency, or the currency on the left, is called the Base Currency. For example, in the SOL/BTC pair, Solana is the base currency. The second component is the quote currency, or supporting currency. The second currency, or the currency on the right, is called the Quote Currency. In the SOL/BTC pair, Bitcoin is the quote currency. The price of a currency pair tells us how much of the quote currency is required to buy one unit of the base currency. [PAUSE] [SHOW SLIDE 12] Now, let’s see exactly what buying and selling a currency pair means. First, let’s examine a Buy, or Long, position. When you Buy the SOL/BTC pair, it means your analysis suggests that the price of Solana will increase relative to Bitcoin and that the chart will move upward. From an economic perspective, this can happen in one of two ways: Solana strengthens relative to Bitcoin; Or Bitcoin weakens relative to Solana. If the price increases, the Buy position becomes profitable, and if the price decreases, the position incurs a loss. [PAUSE] Now, let’s examine a Sell, or Short, position. When you Sell the SOL/BTC pair, it means your analysis suggests that the price of Solana will decrease relative to Bitcoin and that the chart will move downward. From an economic perspective, this can also happen in one of two ways: Solana weakens relative to Bitcoin; Or Bitcoin strengthens relative to Solana. If the price decreases, the Sell position becomes profitable, and if the price increases, the position incurs a loss. [PAUSE] As an important key phrase, remember that [EMPHASIS] every order you place is executed on the first currency. From a trading perspective, a buy order on the SOL/BTC pair means buying Solana and selling Bitcoin. You use this order when your analysis predicts that Solana will rise in value relative to Bitcoin, or in other words, that the SOL/BTC chart will move upward. Similarly, a sell order on the SOL/BTC pair means selling Solana and buying Bitcoin. You use this order when your analysis predicts that Solana will fall in value relative to Bitcoin, or in other words, that the SOL/BTC chart will move downward. [PAUSE] [SHOW SLIDE 13] Now, we come to the important difference between trading in Forex and trading in crypto. When trading a Forex currency pair, we said that the trade is conducted economically and that no currency is actually bought or sold. We’re simply speculating on whether the price will rise or fall, and all profits and losses are reflected in the account’s primary currency. In other words, we might fund our account with dollars and use that dollar balance to open a position on the EUR/GBP pair. In this position, no euros or pounds are actually bought or sold. No euros or pounds are deposited into or deducted from our account. We simply use our analysis and our expectations about whether the EUR/GBP chart will rise or fall to open a position, and the final profit or loss is reflected in the same dollar balance in our account. [PAUSE] However, this isn’t how crypto Spot transactions work. In the crypto market, when you want to open a Buy position on the BTC/USDT pair, it means you intend to buy Bitcoin and sell Tether. Therefore, you must have Tether in your account so that you can pay with it and receive Bitcoin in exchange. If you want to open a Sell position, it means you intend to sell Bitcoin and receive Tether in return. So, you must have Bitcoin available so that you can sell it and receive Tether. This process is exactly like the way physical currency exchanges operate. You visit a currency exchange, hand over your country’s local currency, and receive dollars. Or you hand over your dollars and receive your country’s local currency. Do you remember the key phrase we mentioned about buy and sell orders? [EMPHASIS] Every order you place is executed on the first currency. So, a buy order means that you intend to buy the first currency, and a sell order means that you intend to sell the first currency. [PAUSE] [SHOW SLIDE 14] Another important point about crypto trading pairs is that we don’t have a large number of second currencies, or supporting currencies, in this market. Each exchange may offer only a limited number of them—perhaps three or four supporting currencies. BTC, USDT, USDC, the exchange’s own currency, and one or two other widely used currencies are generally offered as supporting currencies. For example, BNB is the currency of Binance, an exchange that is considered the largest cryptocurrency exchange. Of course, the list of supporting currencies can differ from one exchange to another. [PAUSE] For example, if you have USDT in your account, you can use Tether to buy any currency that has a USDT trading pair on the exchange. However, if you have Solana in your account and want to buy Ripple, with the symbol XRP, there may not be a pair that allows you to make that trade directly, meaning you may not be able to enter a SOL/XRP trade. In this situation, you first need to enter the SOL/USDT pair and open a Sell position so that your Solana is sold and you receive Tether in return. Then, you enter the XRP/USDT pair and open a Buy position so that Tether is sold and Ripple is purchased. I hope this example has helped you understand exactly what I mean. [PAUSE] [SHOW SLIDE 15] Now, we want to discuss the different approaches to buying cryptocurrency. The cryptocurrency market offers many different ways to generate income, which we’ll discuss in detail in the dedicated video about the different ways of earning income from the cryptocurrency market. However, most people who participate in the crypto market generally enter it with one of two approaches: The first approach is trading. And the second approach is investing. Trading refers to actively buying and selling based on price movements over shorter-term or medium-term periods. A trader may use different types of analysis for trading. Common characteristics of trading include: More active decision-making; A higher number of trades; The significant importance of execution costs; Sensitivity to Spread and Slippage; The ability to use Long and Short positions; The possibility of using leverage; And the need for precise entry, exit, and risk-management rules. [PAUSE] [SHOW SLIDE 16] Investing, on the other hand, is generally carried out with a longer-term time horizon. People who are interested in investing in the crypto market buy their chosen currencies with a long-term perspective and hold them until they achieve their desired level of growth. An investor focuses more on the following factors: The problem the project solves; The project’s level of actual use; Network security; The project’s developers; Token economics; Supply and Token Unlocks; The project’s competitors; Ownership concentration; Legal risks; And the way the asset is stored. However, you need to understand that [EMPHASIS] long-term investing doesn’t eliminate the need for risk management. A project may fail technically, lose demand, get hacked, face legal restrictions, or see its token lose a substantial portion of its value. So, investing doesn’t mean buying without a plan. It must be based on knowledge and risk management. [PAUSE] Based on these two approaches, we use different tools. One of the most important and fundamental differences is the platform we need for each approach. For cryptocurrency trading, we use crypto exchanges, while for investing, we generally use Wallets, because wallets are safer than exchanges for holding currencies over the long term. However, wallets don’t provide the same trading capabilities as exchanges and are mainly used to store and transfer currencies. [PAUSE] [SHOW SLIDE 17] Now that we’re familiar with the two main approaches to participating in the cryptocurrency market and we know that we need to use crypto exchanges for trading, we want to examine the different types of exchanges in terms of whether they’re centralized or decentralized. First, we’ll examine centralized exchanges, or CEXs. Centralized exchanges are exchanges operated by a central company or organization. To use these exchanges, users must complete identity verification, deposit their assets into an account on the exchange, and keep those assets on the exchange. On centralized exchanges, because the central company is responsible for providing the exchange’s liquidity, buying and selling many assets may be easier and faster. Another important point is that if you lose access to your account because you’ve forgotten your password or for any other reason, it may be possible to recover the account by completing identity verification again. If you visit the Exchange tab on the CoinMarketCap website, the first category is centralized exchanges. By clicking on this section, you can view a list of centralized exchanges. However, pay attention to the fact that [EMPHASIS] the presence of an exchange’s name on this list doesn’t guarantee that the exchange is secure. Apart from the first few exchanges, which are among the largest exchanges in the crypto market, there may be exchanges lower down the list that aren’t suitable for trading at all. [PAUSE] [SHOW SLIDE 18] The second category is decentralized exchanges, or DEXs. Decentralized exchanges are collections of smart contracts and user interfaces that make it possible to exchange assets without permanently entrusting those assets to a centralized exchange. To put it more simply, decentralized exchanges don’t require identity verification, and this is extremely important from a privacy perspective. You can conduct the transaction you want simply by connecting your wallet to the exchange, and once you’re finished, you can disconnect your wallet. In this situation, your entire balance returns to your wallet, and your money always remains under your control. On decentralized exchanges, you have more control, you can trade a greater number of tokens, you have a very high level of privacy, and you have access to all the features of a centralized exchange. However, if you lose your wallet, password, or assets, there is no support available to recover them, because the only factor that identifies you is your wallet’s connection to the exchange, and there is no other identity document. [PAUSE] In the dedicated video on using exchanges, I’ll teach you how to open an account, complete identity verification, connect a wallet to an exchange, and everything else related to exchanges in full detail. [PAUSE] [SHOW SLIDE 19] As always, before the end of the video, we’ll examine a few common misconceptions in less than one minute. The first misconception: “Crypto and blockchain are the same thing.” No. Blockchain is a ledger technology, and crypto is one of its applications. [PAUSE] The second misconception: “All digital currencies are Coins.” No. Some assets are native Coins of their networks, while others are Tokens created on another network. [PAUSE] The third misconception: “Meme coins are a separate category from altcoins.” According to the common definition, non-Bitcoin meme coins are themselves considered altcoins. [PAUSE] The fourth misconception: “A stablecoin is exactly the same as the dollar.” No. A stablecoin is a token that attempts to keep its value close to the dollar or another asset. However, it still faces issuer risk, reserve risk, redemption risk, and Depeg risk. [PAUSE] The fifth misconception: “My asset is stored inside my wallet.” In reality, the asset is recorded on the blockchain, while the wallet manages your keys and your interface for accessing that asset. [PAUSE] The sixth misconception: “If I can see my asset on an exchange, I have full control over it.” On a centralized exchange, the keys are generally controlled by the exchange itself, and your ability to withdraw depends on the exchange’s operation and conditions. [PAUSE] The seventh misconception: “Leverage increases my capital.” No. Leverage increases your controllable Exposure, while also increasing the risk of loss and Liquidation. [PAUSE] The eighth misconception: “A DEX has no intermediaries and no risks.” A decentralized exchange may not have a corporate intermediary holding your assets, but it still depends on smart contracts, the network, the user interface, Oracles, and liquidity. [PAUSE] The ninth misconception: “If I make an incorrect transaction, customer support will reverse it.” On many blockchains, a confirmed transaction is irreversible, and recovering the asset may be impossible. [PAUSE] And the final misconception: “Operating 24 hours a day, 7 days a week means liquidity is always excellent.” No. Liquidity varies across different times, exchanges, and assets. [PAUSE] [SHOW SLIDE 20] I hope this lesson has helped you become thoroughly familiar with the cryptocurrency market. My goal in this video was to help you develop a solid understanding of the crypto market and establish the foundation you need to begin participating and continue with further lessons. If you’re interested in learning more about blockchain and cryptocurrency, you can watch the supplementary video for this lesson. I wish you success.